The U.S. District Court for the Eastern District of Texas (EDTX) has long been recognized as a hotbed for patent litigation, but its appeal to plaintiffs in another type of intellectual property litigation—trade secret theft—may be rising. Two multi-million dollar verdicts in the past two months suggest that aggrieved trade secret owners should seriously consider launching litigation in the EDTX.
The first case, Bianco v. Globus Medical, Inc., Case No. 2:12-cv-00147, Dr. Bianco brought a trade secret misappropriation claim (among others) against Globus Medical. Bianco is a neurosurgeon practicing in Texas and specializes in minimally-invasive brain and spine surgeries. Bianco and Globus entered into a confidentiality agreement covering certain ideas and designs that Bianco shared with Globus. One of his ideas included a product design for an expandable intervertebral fusion device for use in minimally invasive spinal surgeries. Globus later developed a medical device known as Caliber-L, which Bianco contended incorporated the confidential information he disclosed under the agreement.
At trial, the jury rendered a verdict on January 17, 2014, finding Globus liable for misappropriation of trade secrets. The jury found that the proper measure of damages should be a reasonable royalty and awarded $4,295,760 in damages. Interestingly, since the verdict, the parties have also litigated whether the court should enter a permanent injunction. Recently, the court denied the request for a permanent injunction largely because the court found there was an adequate remedy at law—damages—so the court instead awarded damages for ongoing royalties going forward on the products at issue.
As an interesting side note—the case was presided over by Judge William Bryson of the Federal Circuit who was sitting by designation in the EDTX. Judge Bryson, like some of the other Federal Circuit judges, has presided over several trials in the Eastern District of Texas in the past few years.
The second case of note, more recently, is LBDS Holding Company, LLC v. ISOL Technology, Inc. et al, Case No. 6:11-cv428. LBDS claimed to have developed a highly confidential and proprietary technology relating to magnetic resonance imaging. LBDS and some of the defendants entered into a business relationship and signed a services agreement several years ago, which included a provision on confidentiality of the information exchanged. Years later, LBDS alleged that the ISOL defendants had misappropriated LBDS’s trade secrets exchanged under the agreement, and at least one of the defendants even developed a competing MRI system using LBDS’s technology. LBDS asserted several claims against the defendants including breach of contract and misappropriation of trade secrets.
At the conclusion of the trial on March 12, 2014, the jury returned a verdict finding ISOL liable for breach of contract, misappropriation of trade secrets, and unfair competition. The jury awarded $24,414,068 in damages for lost profits on the breach of contract claim and an additional $760,693 in damages for the misappropriation of trade secrets and unfair competition claims.
Although judgment has not been entered on either on the verdicts in these cases, the verdicts (and the amount of damages awarded) are noteworthy, suggesting that trade secret owners should consider the EDTX as a venue for litigating trade secret theft claims, if possible.
Even without these headline-making verdicts, however, we believe there are good reasons the EDTX would be a favorable venue for trade secret litigation. Trade secret cases often involve highly complex technology, and EDTX judges (and their staffs) are very experienced in technology-heavy litigation because of the hundreds of patent cases they have handled. Further, the judges have processes in place for streamlining discovery, and good procedures are setup for the protection of highly sensitive information produced and used in litigation.
The biggest obstacle to trade secret litigation taking off in the EDTX, however, is likely issues with obtaining proper venue. In patent cases, setting aside whether venue is “convenient” under 28 U.S.C. § 1404(a), proper venue is fairly easy to obtain if patented products are sold in the district. This in turn has enabled many patent infringement suits to be properly filed in the EDTX because most patented products of any significant value are sold all over the country. But venue is not so flexible in trade secret cases, and it generally requires the misappropriation itself, or alternatively actions or parties central to the misappropriation, take place or be located in the district.
Nevertheless, these two recent verdicts are proof that high stakes trade secret litigation can be brought in the EDTX. And with the EDTX overlapping the Telecom Corridor north of Dallas, for example, there is reason to believe significant trade secret litigation may be brought in the future.
Finally—a shameless plug for Fish & Richardson—many of our attorneys, including the authors of this blog, have vast experience litigating cases in the EDTX. We have represented clients in hundreds of cases in the EDTX, and have taken scores of these cases all the way through verdict. Our EDTX experience and trade secret theft expertise place us in a unique position to assist clients in trade secret matters in the EDTX.
Article co-authored with former Fish attorney, Stephen E. Fox